Big Four firm buys services 'disruptor' Riverview

Global accountancy giant EY today laid down a significant marker in its expansion into legal services with the capture of forward-thinking firm Riverview Law.

The acquisition, announced this morning, is expected to complete at the end of this month after which Riverview Law will be known as EY Riverview Law. No financial details were revealed.

The deal marks another step in what has long been predicted would be the rise of the 'Big Four' accountancy firms to rival - and possibly overtake - the biggest existing law firms. Each of those four, EY, KMPG, PwC and Deloitte, now provide reserved legal services.

To give a sense of the scale of their financial might, EY reported income of £2.35bn in the UK last year – far in excess of any law firm’s turnover in the same period.

EY, which entered the legal market in 2014 through an alternative business structure, says it now has more than 2,200 law practitioners in member firms across 81 jurisdictions. According to a statement it now intends to enhance and scale up its legal managed services offering and help clients to increase efficiency, manage risk and reduce costs of routine legal activities. The company said the acquisition helps give EY ‘first-mover advantage’ in legal managed services and establishes it as a ‘leading disruptor’ of legal services.

Riverview, led by Karl Chapman, has been at the forefront of efforts to change how legal services are packaged and marketed, marketing itself as a fixed-fee provider for blue-chip clients with an emphasis on technology.

Cornelius Grossmann

EY Global Law

Cornelius Grossmann, EY Global Law Leader, said: ‘Legal managed services is one of the fastest growing segments of the legal market. This acquisition underlines the position of EY as a leading disruptor of legal services; it will provide a springboard for current EY legal managed services offerings and bolster the capabilities that we can help deliver for EY clients.

‘We recognise the expertise that Riverview Law has in this growing market area, which when married with the global EY footprint and legal understanding will help drive significant opportunities for EY clients.’

Riverview was created as a trading name for LawVest Ltd, whose shareholders included DLA Piper and HR outsourcing firm AdvisorPlus. The firm was among the first alternative business structures to enter the commercial market, offering annual contracts providing unlimited legal advice, scrapping hourly billing and fixing fees on all services.

Initially a team of around 75 lawyers, including 43 barristers, were recruited to work in a corporate rather than partnership structure.

In 2013, the firm unveiled plans to hire 100 new staff including lawyers, business law executives, client managers, IT developers and data analysts. Chapman stated the firm’s recruitment policy was to eschew qualified lawyers and take on school leavers only who could be trained in-house.

The firm has also worked with the University of Liverpool to find ways of applying artificial intelligence to legal processes.

The firm has also worked with the University of Liverpool to find ways of applying artificial intelligence to legal processes.

But the most recent published accounts, covering the year ending 30 September 2017, show the business was not having the impact some had predicted.

Riverview Law actually reported a net loss of around £17,000, with net liabilities of more than £2.3m. The average number of employees, including the directors, was reported as 93.

Karl Chapman, chief executive of Riverview Law, said: 'The legal profession is going through a period of significant global upheaval. Changes in regulation, technology and most importantly customer expectation create an opportunity for a more flexible and customer-centric approach to the provision of legal services. We believe that the combination of the Riverview Law operating model, operating platform and people, alongside the EY brand, EY clients, existing legal services offering and global scale is a winning formula for the legal market.’

I'm not really seeing anything in this article about what E&Y are *actually going to do* with Riverview. It'd be interesting to know this. The article gives no detail other than fixed fees, unlimited legal advice and scrapping hourly billing. I'm not really sure that it's worth buying a business on the basis of things that are easily copied within a relatively short period of time. There is a tantalizing mention of AI, but no real detail. A lot of firms (law and non law ) have been looking into AI for some years now, this is not really a new idea. Unless Riverview have developed some ground breaking, sorry, game changing proprietary software that will wipe the floor with their competitors, I'm struggling to see the rationale here.

'...with the capture of forward-thinking firm Riverview Law.......
and
Riverview Law actually reported a net loss of around £17,000, with net liabilities of more than £2.3m. The average number of employees, including the directors, was reported as 93.'

Judging by how well the big four are doing in Auditing and Accounting, in maelstrom of bad practice (eg RSM Tenon, BHS etc) record fines and a lack of concern for anything other than billing their hapless clients, their "disruption" will be short-lived.

I'm not convinced that a policy of not using lawyers and recruiting school leavers instead, is particularly confidence inducing. Let me "stress test" the idea. You are lying in the operating theatre and Darren your surgeon bounds in. He is full of enthusiasm and has no need to shave.
"I got GCSE biology on the third attempt," he brags with all the confidence of a 19 year old.
"And Ken here will be giving you the drugs, which will be the first time, because normally he takes them himself."

Do you:

(a) Relax, because you are not in the hands of some arrogant 50 year old who has done this thousands of times before.
(b) Have a vague sense of unease.
(c) Leap off the operating table, screaming, "I'll go private!!!!"

Interesting that in this barely re-worded press release there is no mention of a sale price. Can we guess, given the scale of the debt and ongoing losses that ‘capture’ and ‘acquisition’ are used to signify that the business had no value beyond its debts?

It is of further interest that the release focusses on EY’s income and potential rather than Riverview’s.

I am going to boldly assert that this is much more insignificant news than the headlines would suggest.

Yet another acquisition phrased in the terminology of a merger ("the combination of the Riverview model etc etc""). Whether it was a distressed sale or not (and net liabilities could simply be because it was building scale and had taken out the short term loans to do that - like any other startup) I would focus on the fact that it was a sale. I take encouragement that people are buying law firms, and those people are genuine businesses in their own right (£2.35bn in the UK! I assume they are not naïve businessmen)

Call me old fashioned but a business that has been trading since 2013, has liabilities of £2.3 million, has 93 directors and is still making a loss seems to me more like a business that has been unloaded, rather than a business that has been strategically acquired.
Great PR but I note that no purchase price is mentioned.
Many law firms are trying to disrupt the market but few actually succeed.

What could possibly go wrong? Oh, it already has "Riverview Law actually reported a net loss of around £17,000, with net liabilities of more than £2.3m. The average number of employees, including the directors, was reported as 93."

Having used a subscription model for some clients 20 years ago and seen the extra profits this can create, I was urging law firms to go down this route for commercial clients for many years.
Accountants have as a general rule, a lot more regular contact with their clients than law firms do and are in a great spot to see future work needs very early.
E&Y are to be feared, as unless they really mess this up (unlikely) they'll be creaming off a lot of advisory work which might otherwise go to law firms.
Forget the 'disruptor' jargon etc, start thinking about what you need to do to combat this threat, that of the Excello Laws etc.

Have Karl Chapman and Cornelius Grossman lost the ability - assuming that they ever had it - to speak in plain and intelligible English? I like to think that I have a modicum of intelligence but I fail to understand a large part of the technobabble and insider gibberish within their quoted remarks. But maybe this is because I've not been initiated into their 'inner circle'? However I'm left wondering whether most 'ordinary' people will think it a plus point when they claim Riverview Law to be 'a 'leading disruptor' of legal services'.

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